Asia stocks higher on hopes for US budget deal

Asian stock markets rose Wednesday as investors became increasingly convinced that U.S. political leaders will reach a budget deal that avoids a major hit to the world's No. 1 economy.

Negotiations between the White House and the U.S. Congress have been revving up in recent days in order to reach a deal aimed at averting the so-called fiscal cliff — a series of sharp government spending cuts and tax increases that begin to kick in Jan. 1 and could cause a recession.

Despite political posturing and a deep divide on critical issues, most analysts think a deal acceptable to both President Barack Obama and congressional Republicans will be cobbled together before the end of the year.

Analysts at DBS Bank Ltd. said that "the US fiscal cliff is viewed as political theatre and not as an imminent threat to the US economy."

"Unlike 2010, both the White House and the Republicans have been careful in communicating that, despite the differences in opinions over how to rein in the fiscal deficit, the door is open for a compromise solution by the end of the year."

Wall Street fell Tuesday as investors waited for developments in the budget talks. The Dow Jones industrial average fell 0.1 percent to close at 12,951.78. The Standard & Poor's 500 index fell 0.2 percent to close at 1,407.05. The Nasdaq composite fell 0.2 percent to 2,996.69.

Investors are also focused on U.S. economic data due for release later in the week. On Friday, U.S. nonfarm payrolls figures for November — a key gauge of employment — will be released. The figures could be distorted by the impact of superstorm Sandy, which battered much of the eastern seaboard.

There's already evidence the storm has had an impact on the U.S. economy. Monday's monthly manufacturing survey from the Institute for Supply Management was far weaker than anticipated.

Benchmark oil for January delivery was up 16 cents to $88.66 per barrel in electronic trading in the New York Mercantile Exchange. The contract fell 59 cents to close at $88.50 per barrel on the Nymex on Tuesday.

In currencies, the euro rose to $1.3103 from $1.3101 late Tuesday in New York. The dollar rose to 82.18 yen from 81.84 yen.